How does Hardees account for closing costs and other fees related to sale-leaseback transactions?

According to Hardees' 2025 Franchise Disclosure Document, closing costs and other fees related to sale-leaseback transactions are accounted for as deferred financing costs. These costs are recorded as a reduction to the liability balance. Subsequently, they are amortized to interest expense over the initial minimum lease term.

This accounting treatment means that instead of expensing these costs immediately, Hardees spreads them out over the life of the lease. This can have a positive impact on the company's financial statements in the short term, as it avoids a large, one-time expense. However, it also means that the company will be paying off these costs over a longer period of time.

For a prospective Hardees franchisee, understanding this accounting practice is important because it provides insight into how Hardees manages its lease obligations and reports its financial performance. Sale-leaseback transactions can be a significant part of a company's financing strategy, and the way these transactions are accounted for can affect key financial metrics such as profitability and debt levels. Franchisees may want to inquire about the specific terms and conditions of any sale-leaseback agreements that could affect their operations or financial obligations.